Chuck Wagon Catering, Inc. v. Raduege

• Decision Date: 01 May 1979
• Docket Number: No. 76-449,76-449
• Citation: 88 Wis.2d 740,277 N.W.2d 787
• Parties: CHUCK WAGON CATERING, INC., Plaintiff-Appellant, v. Warren RADUEGE, Defendant-Respondent.
• Court: Wisconsin Supreme Court

Page 787

277 N.W.2d 787

88 Wis.2d 740

CHUCK WAGON CATERING, INC., Plaintiff-Appellant, v. Warren RADUEGE, Defendant-Respondent.

No. 76-449.

Supreme Court of Wisconsin.

Submitted on Briefs Feb. 28, 1979.

Decided May 1, 1979.

Timothy K. Tollaksen and Herbert L. Usow, S. C., Milwaukee, on brief, for plaintiff-appellant.

Bryan A. Frame, II and Brenner, Brenner & Frame, Waukesha, on brief, for defendant-respondent.

DAY, Justice.

This is an appeal from a judgment of the circuit court for Waukesha County, the Honorable William E. Gramling, presiding, entered January 11, 1977, denying recovery to Chuck Wagon Catering, Inc. for breach of a restrictive covenant in a leasing agreement, except for $189.82 which defendant admitted owing plaintiff for purchases made by him.

The questions on appeal are:

1. Is the restrictive covenant in the lunch wagon route leasing agreement enforceable?

2. Did the trial court err in concluding that no cause of action for intentional interference with contract was proven?

3. Was the trial court's finding that appellant was entitled to neither compensatory nor punitive damages erroneous?

Chuck Wagon Catering, Inc., a Wisconsin Corporation, lessor, brought this action against Warren Raduege, lessee, to recover liquidated damages, compensatory damages and punitive damages for the breach of a restrictive covenant in the lease agreement.

Chuck Wagon Catering, Inc., (hereafter Chuck Wagon) is engaged in the mobile catering business servicing Milwaukee and surrounding counties. The business consists of selling food and beverages from trucks to the employees of industrial plants and commercial establishments at scheduled times during the working day, usually at nearby parking lots. Norman C. Gilbert, president of Chuck Wagon and manager of operations, testified that he established the particular lunch route in question and established relationships with customers which resulted in informal agreements that Chuck Wagon trucks would be allowed on the customers' property during breaks and lunch periods.

The route in question was serviced by Chuck Wagon employees for six years before it was leased, along with a truck to Mr. Raduege. On February 27, 1973, Raduege entered into an agreement with Chuck Wagon wherein he agreed, among other things, to pay fifteen dollars per day rental for the use of a truck and the route and to purchase all commodities used on the route from Chuck Wagon. The agreement provided that the route should remain the property of Chuck Wagon, and that as between the lessor and the lessee the route and identity of customer stops were to be regarded as a "trade secret." ¹ In the agreement, Raduege agreed that for one year following termination of the contract he would refrain from engaging in the business of catering to customers on the lunch route which he was leasing. The agreement provided that liquidated damages for breach of this covenant would be $2,500. ²

Raduege testified that he was not given a written list of the customer stops on his route, but that a Chuck Wagon driver accompanied him his first three days on the job and pointed out the stops to him, at which time he wrote the addresses down himself. After he had been on the route for one year, Raduege bought his own truck, and the rent was reduced to nine dollars per day for the route alone by agreement between the parties. Raduege's profit came from the mark-up he got on the food and beverages he purchased from Chuck Wagon, the normal mark-up being fifty percent. Raduege continued to purchase his food and beverages from Chuck Wagon and to pay rental on the route until October 1, 1975 when, without notice to Chuck Wagon, he switched to another supplier and stopped paying rent for the route, though he continued to service it.

Mr. Gilbert testified that when he discovered that Raduege was servicing the route on his own, he sent one of his other drivers out on the route in a Chuck Wagon truck, but that customers continued to buy from Raduege rather than from the Chuck Wagon driver. Raduege testified that two Chuck Wagon trucks followed him on the route, trying to sell to the same customers, for a week after he went out on his own. Gilbert testified that he cut prices for the food on the Chuck Wagon truck in half at one point, and that he offered free coffee at one plant where Raduege was charging twenty cents per cup, and yet the customers still bought from Raduege. He also testified that at some plants the Chuck Wagon truck driver was told not to enter the company premises because Raduege was servicing them. Raduege was still servicing the route at the time of the trial.

Chuck Wagon's amended complaint against Raduege alleged breach of contract and tortious interference with contract. The trial court held that the list of customer stops which constituted the route Raduege serviced was not a trade secret, and that the restrictive covenant in the lease agreement between Chuck Wagon and Raduege was not necessary for the protection of Chuck Wagon since "any stranger would be fully able to acquire the information which was made available to the defendant." The trial court determined that Chuck Wagon was entitled to recover only the $189.82 for provisions purchased by Raduege on his

final day of work for Chuck Wagon which is not challenged on

appeal. QUESTION # 1: IS THE RESTRICTIVE COVENANT

IN THE LUNCH WAGON ROUTE LEASING

AGREEMENT ENFORCEABLE?

The trial court in its written decision said:

"Closely intertwined with the question of whether the employer has a protectable interest is the question of whether the paragraph purporting to prohibit the defendant from competing with the plaintiff is, in fact, an enforceable provision. The burden of proof is upon the plaintiff to show that any such restriction upon defendant's right to accept or to have similar employment after termination of the contract is, in fact, a reasonable requirement. The Court is of the opinion that the plaintiff has failed to meet this burden of proof. 55 Marquette Law Review, 241, entitled 'Drafting and Enforcing Restrictive Covenants Not To Compete,' states that there are 5 separate elements, all of which must be met in order for the covenant to be enforceable. These five requirements are the necessity of the covenant for the employer's protection, the reasonableness of the territorial limitations provided, a showing that the covenant is not unreasonable to the employee, and a showing that the covenant is not unreasonable to the general public. Lakeside Oil Company v. Slutsky, 8 Wis. (2d) 157 (98 N.W.2d 415), states: 'An employer is not entitled to be protected against legitimate and ordinary competition of the type that a stranger could give.' Certainly the facts in this situation do not meet the standard set forth in Slutsky. As the Court indicated above, any stranger would be fully able to acquire the information which was made available to the defendant. Other standards as set forth are not followed and the Court need not discuss that any further.

"The Court then is of the opinion that a trade secret was not involved, and secondly, that the restrictive covenant is not enforceable."

In its Findings Of Fact, the court after having earlier quoted the restrictive covenant in the lease said:

"That whether or not a list of customers was furnished by plaintiff to defendant, such information as would be contained in a list of customers could be obtained by any individual who merely followed one of the plaintiff's vehicles and noted the stops made."

In its conclusions of law the trial court said:

"That the provision of the agreement between the parties hereinabove set forth, which purports to be a restrictive covenant, is an unreasonable restrictive covenant and is, therefore, unenforceable by the Court."

Nowhere does the trial court make any specific factual findings relating the evidence adduced at trial to the Slutsky criteria. The trial court concluded as a matter of law that the standards were not met without specific reference to the record.

Failure by the trial court to make findings of fact is not necessarily reversible error. Hochgurtel v. San Felippo, 78 Wis.2d 70, 86, 253 N.W.2d 526 (1977). As this court stated in State ex rel. Skibinski v. Tadych, 31 Wis.2d 189, 199, 142 N.W.2d 838 (1966), when there is a failure to make findings of fact, this court on appeal may adopt one of three courses: (1) Affirm the judgment if clearly supported by the preponderance of the evidence, (2) reverse if not so supported, or (3) remand for the making of findings and conclusions.

After reviewing the record, we conclude that the findings of fact are against the great weight and clear preponderance of the evidence, and that the Slutsky standards were not properly applied. Therefore, we reverse.

We conclude the restrictive agreement in this contract was enforceable subjecting the defendant to a claim for the liquidated damages provided for in the contract.

This court has consistently held that a list of customers per se does not constitute a trade secret. Abbott Laboratories v. Norse Chemical Corp., 33 Wis.2d 445, 465-468, 147 N.W.2d 529 (1967); American Welding & Engineering Co. v. Luebke, 37 Wis.2d 697, 155 N.W.2d 576 (1968); Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis.2d 202, 267 N.W.2d 242 (1978). In Abbott, supra, the court held that names and addresses of customers which were easily ascertainable, or which were generally available to the trade do not constitute a trade secret. One of the factors relied upon in reaching that holding was that the defendant-salesperson in that case had developed no particular relationship with the customers on the list since these customers were not retail customers, they bought from several suppliers, and they bought on price and quality rather than out of loyalty to any one salesperson. The court stated that, ". . . contact of a customer by a former employee is not as unfair as in the area of a...